To what extent has the plethora of capacity-building programs, trainings, and initiatives in recent years increased the capacity of the nonprofit sector to serve more people in a way that promotes social change? Has the professionalization of the sector broadened or deepened society's safety net? And have foundation-funded capacity-building efforts groomed the next generation of leaders or equipped the sector sufficiently to prepare for the future?

Sadly, the answer to all three questions is, Not really. It seems that well-intentioned efforts to increase the capacity of nonprofit organizations have missed the mark, and that has serious implications for the future. More of the same or making slight adjustments to traditional capacity-building efforts are not the answer.

To hit the mark, you need to see the target clearly. Unfortunately, different foundations have different goals when initiating capacity-building funding. Some seek incremental improvement among a group of grantees, while others want to build the personal skills of selected nonprofit leaders, and still others desire to enhance the ability of an organization to serve more people.

Unfortunately, while there is a lot of passion and discourse around effectiveness and outcomes-based grantmaking, the majority of capacity-building efforts seldom achieve lasting, sustainable change. In the rest of this article, I will make the case for refocusing the content and delivery of traditional capacity-building efforts by:

Focusing those efforts on top performing leaders

Addressing leadership capabilities rather than management skills

Differentiating between good and great performance

Designing structures that give organizational leaders time for self-reflection and to build self-awareness

Allowing the growth and development of leaders to occur in real time and on the job

Focus on the Right People

Although many capacity-building efforts have been successful in building the particular skill sets of individuals, they've seldom resulted in increased organizational capacity, let alone significant change in the communities served by those organizations. Why?

There are two primary reasons:

They are directed at the wrong audience — i.e., most foundation-funded capacity-building efforts are geared toward nonprofit executives who are either new to their role or are "middle of the pack" performers.

They focus on the wrong topics. A majority of the efforts billed as "capacity building" are really skill-building endeavors that are most valuable to frontline staff or middle managers but do little to develop the leadership potential of potential "stars" within an organization.

If the goal is to improve organizational impact, capacity-building efforts targeted at average performers are reaching the wrong group of people. Research conducted by John H. Zenger for his book The Extraordinary Leader: Turning Good Managers Into Outstanding Leaders indicates that well-designed professional development efforts can help staff at all levels improve their performance. But to really improve organizational performance, Zanger's research suggests that the real focus of those efforts should be on those who rank in the top 25 percent of the organization's performers.

Business leaders have known this for years and focus their leadership development efforts accordingly. They reserve their best executive-education programs for their top performers and assign mentors and coaches to those who fall into that category. In Good to Great and the Social Sectors, Jim Collins writes about the need to "get the right people on the bus in the right seats," and the right people, in Collins's formulation, are those who consistently strive to excel and improve.

Even if funders focused their capacity-building efforts on top performers, however, the standard approach to capacity building would not result in stronger organizations or a more robust nonprofit sector. The standard approach to capacity building has almost always focused on management skills versus the art of leading. If the target is incremental change, enhancing the skill sets of managers will suffice. But if the outcome we desire is increased organizational capacity over the long-term, then investment in leadership is critical.

Why don't more capacity-building efforts focus on building leadership capabilities? Well, maybe like Justice Potter Stewart's view of pornography — "I know it when I see it" — leadership is hard to define and even harder to evaluate.

Sure, it's easy enough to determine whether a controller or budget director knows how to develop a budget. And you don't have to be a rocket scientist to measure whether an organization was able to recruit three new board members or secure two new grants within six months of a specific training. What's more, in an age of needing to measure everything as proof of doing the right thing, it's tempting to offer quick-fix capacity-building programs which emphasize outcomes that are readily quantified.

Then, too, people shy away from talking about developing leadership because they're often afraid such efforts will turn into a popularity contest. Which is just silly. Peter Drucker said it best: "Leadership is not magnetic personality — that can just as well be a glib tongue. It is not 'making friends and influencing people' — that is flattery. Leadership is lifting a person's vision to higher sights, the raising of a person's performance to a higher standard, the building of a personality beyond its normal limitations."

The good news is that capacity-building efforts can be designed in such a way that they will result in increased organizational impact and a stronger nonprofit sector.

New Models for Capacity Building

Effective leadership development efforts represent a significant departure from the traditional organizational capacity-building approach that foundations have supported for years. The five elements of effective leadership development are:

Self-awareness;

Participant-specific learning outcomes;

An understanding of the difference between being good at something and excelling at it;

Knowing the difference between being a manager and being a leader; and

Having time to apply the principles of leadership on the job by practicing new behaviors, reflecting on those behaviors, sharing learnings with others, and triggering the feedback loop all over again.

1. Self-awareness

Effective leadership development requires top performers to look inside themselves first before they look beyond themselves. Because subordinates often are reluctant to offer criticism and board members can be vague about day-to-day matters, however, most chief executives lack frank and specific feedback on how they are perceived. To lead effectively, chief executives need to possess the self-awareness of how their reputations, behaviors, decisions, and inactions affect their teams and the work environment.

Effective leaders learn not only what new things to take on to ensure their organization's success in the future, they also learn what behaviors or traits no longer serve them in existing circumstances and need to be shed. One of the greatest ironies of leadership is that the skills and competencies that helped elevate leaders to their present circumstances are rarely the ones they need to advance their organization to the next level.

2. Participant-specific learning outcomes

An effective leadership development effort designed to build organizational capacity needs to be structured in such a way that each participant develops an understanding of what his or her organization needs both now and in the future. That means the take-aways and lessons learned will be different for each participant.

3. Differentiating between good and great

There's a huge difference between outstanding performers and average ones. Research on top performers from both the corporate and nonprofit sectors found strikingly similar results:

High performers are more productive than average performers

Top managers have lower staff turnover than average ones

There is a statistically significant relationship between leadership effectiveness and financial stability — i.e, the more effective the leader, the stronger an organization's finances tend to be

4. Distinguishing leadership from management

A leadership development program that seeks to build organizational capacity should help people recognize when they are managing an organization as opposed to leading it. Most professional development efforts are designed to help people build skills and teach them to "do" something. But developing one's leadership potential is as much as about helping people "be" a leader as it is about learning to "do" new things.

In his book Leaders Who Make a Difference, Burt Nanus distinguishes leadership from management in the follow manner: "Managers are charged with operating an organization and ensuring it provides useful services to clients and the community efficiently and effectively. While concerned about the present, leaders are focused on the future direction of the organization, positioning it to take advantage of emerging opportunities, ensuring it is positioned to change [in response] to external circumstances, developing new capacities and making it an adaptable, learning organization."

The following table outlines some of the differences between leading and managing:

Managers

Leaders

Make things happen and keep work on track

Create opportunities and make key choices

Get the best return on investments already made

Decide where and when to invest/divest in search of new opportunities

Set goals and track progress

Inspire achievement and energize people

Learn from their own mistakes

Learn from the success of other organizations

Undertake activities to address established priorities

Prepare the organization to meet new challenges

Establish plans and deadlines

Articulate a vision and instill passion

Seek funding for immediate needs

Plan and acquire resources needed in the future

Identify standards and efficiencies

Help others discover what will make a difference

Problem-solve and hold others accountable

Motivate and coach others

Have people report to them

Have followers

Provide the structure

Create the means

Do things right

Do the right things

Let's look at two of these differences in more detail.

Example #1:

When managers work to get the best return on investments already made, their focus usually is on efficiency. That's important, but it's not the whole story. I would argue that a more valuable use of their time is deciding where and when to invest/divest in search of new opportunities.

When managers focus on the best return on investments already made, their mind-set tends to run to questions like, "If we stop doing project A, how will it impact our client base, employees, and funding streams?" When leaders focus on identifying and creating opportunities, the question becomes, "How do I engage funders and staff in a dialog about where we want to be in the future?" Obviously, the second approach is more likely to give birth to new or expanded organizational capabilities.

Example #2:

Effective managers undertake activities to address established priorities that dovetail with the organization's strategic plan. Leaders spend their time preparing to meet new challenges. As poet-turned-management guru David Whyte says, "It's the job of leaders to step out into the future that's not yet created, to hear the voices that you don't yet recognize."

The nonprofit sector is just beginning to see and encourage this kind of proactive planning in response to a looming executive succession crisis, but philanthropy should think far more broadly about what nonprofit leaders really need in order to help the sector navigate what promises to be an uncertain future.

5. Taking the time to reflect, practice, and learn

We know from adult learning theory that most adults don't learn that well in classroom situations; instead, they learn best when doing the work required of them. To achieve a change in behavior or embody a new way of thinking, a leader must apply new concepts to their work while on the job.

To continuously learn from our experiences and make course corrections along the way, we need to take time to assess and reflect on our circumstances and the factors which contributed to their creation. "Most of us are so action-oriented that we fail to learn from our actions and the outcomes of those actions," says Peter Senge, author of The Fifth Discipline. In other words, learning is an active process, but it won't happen if people don't give themselves the time to learn.

Support Strategies for Leaders

It helps if a leader has a structure that allows time for reflection. One of the mechanisms widely used to this end is the use of peer-learning circles or networks, the benefits of which have been well documented. And because nonprofit executives often cite isolation and a lack of peer interaction within their organizations, structured interaction with other CEOs can provide that structure.

Another business practice increasingly used in the nonprofit sector is executive coaching. Coaches will help a leader question his or her assumptions, interpretations, and conclusions. They are good at offering encouragement and pushing a leader to keep raising the bar; can provide candid, impartial feedback when things don't go as planned; and will offer a range of options for moving ahead.

A coach can help a leader navigate a transition experience, assist a leader in connecting short-term strategies to longer-term plans, and help identify possible bridges to the future. And unlike consultants, a coach doesn't lead a client. Indeed, as Robert Hargrove, author of Masterful Coaching, notes, the role of a leadership coach is to help a leader discover the assumptions or behaviors that produce unintended results.

The art of articulating a vision and instilling a passion in others to pursue that vision isn't a skill people acquire by reading a book. Leaders learn about leadership by leading. Therefore, capacity-building efforts need to be redesigned so that leaders engage in these kinds of development efforts on the job. The foundation community must recognize that leaders who engage in their own professional development, translate their intentions into actions, reflect on and learn from those experiences, and translate their learning into greater organizational capacity are the ones most likely to marshal the full potential of the sector to create change in our communities.

Philanthropy as Change Agent

Forward-thinking funders increasingly seek to be change agents in their communities as well as on the issues they care about. Any funder wishing to improve the organizational capacity of the nonprofit sector should consider these four strategies:

1. Support the next generation of leaders

While many management support organizations offer programs that build basic management skills among the current generation of nonprofit leaders, it's time we began to target the next generation. If the sector is going to get serious about improving its performance and adhering to increasingly higher standards of accountability, frontline managers need to become more familiar with basic fundraising, budgeting, personnel, and governance responsibilities well before they become executive directors or CEOs. CFOs, development officers, program staff — all should be given the opportunity to interact and work with their counterparts on the board before being tapped to become an organization's CEO or executive director.

2. Encourage boards to support leadership development

There needs to be a shift away from the current mind-set which holds that professional development is only only for those leaders who are faltering or are new to their role. To ensure a steady stream of future leaders and retain our top performers, we need to take a lesson from the corporate sector and accept the fact that leadership development is critical to the future success of our organizations. By the same token, nonprofit boards need to recognize that, more than any other variable, an organization's ability to deliver results depends on the quality of its staff.

3. Reward top performers

Rewarding top performers and showcasing outstanding leaders is yet another strategy. Funders can also work to minimize the perception that leadership development is remedial rather than a reward or perk for top performers. Foundations like the James Irvine Foundation have recognized that linking leadership development to organizational recognition programs is a win-win for grantees as well as funders.

4. Recognize the potential of executive coaching

A 2003 evaluation of the CompassPoint Coaching Project outlined six areas in which coaching had a profound impact on nonprofit leaders and their organizations. Some of the key findings included:

Improved ability to connect to the organization's vision and lead others in fulfilling it

Increased confidence in exercising leadership

Improved relationships with board and staff

Improved clarity in decision-making, roles, and responsibilities throughout the organization

Better teamwork, cooperation, communication, and productivity

The study, along with a small number of other evaluations on the value of executive coaching, underscore the benefits that effective coaching can provide a leader as well as his or her organization. Many foundations already provide resources and support for capacity-building initiatives. They should also consider providing vetted lists of certified coaches specializing in the nonprofit sector to their grantees.

Finally, foundations can help change the notion that coaching is a punishment reserved for low-performing leaders. Taking a cue from the for-profit sector, foundations should step up and, as part of their overall capacity-building strategy, declare that executive-coaching programs are a reward for top performers.

If Not Now, When?

In order to effectively target their capacity-building resources, funders must consider and adopt new ways of strengthening the nonprofit sector.

Encouraging skill building and management training for frontline managers before they become executive directors is a start. Being clear about the difference between management training and leadership development is crucial. Singling out top performing chief executives and providing them with leadership recognition and development opportunities also is critical, as is the promotion of leadership development programs that focus on building leadership capabilities rather than management skills.

To meet the challenges of the twenty-first century, the nonprofit sector — in partnership with government and the private sector — will need to be at the top of its game. Supporting the ongoing development of leaders is an important first step toward improving the organizational capacity of nonprofits so they are able to meet the ever-increasing demand for their services and are prepared to help lead us all to a brighter future.